High Employee Turnover - A Business Killer

While some employee turnover is inevitable and indeed desirable; a high rate of turnover will kill your business eventually.  Turnover and employee relationships are often the last places management looks to improve a company’s profit and operations, missing vital components to a successful business.

Turnover harms your business because of the costs to hire new employees; the loss of trained employees; the loss of institutional memory and abilities; the loss of business reputation and the loss of productivity.  You may not see these costs initially in your financial reports, but they will eventually cause a downward drift of your profits and upward climb of costs.

The standard measure of turnover in a month is:

(Number of Separations / Average Number of Employees)  X 100%

It is useful to calculate this metric and track it over time.  But to solve the problem of high turnover you will need to investigate and determine why employees have left to get at the root of your problem.

Reasons will vary by company but the most common causes of high employee turnover are the following:

1.  Poor Supervision/Management.  Many people leave their jobs because they don’t respect their boss.  If most of your turnover is from one area of the company, the first place to look for improvement is with the management.  Managers that do not set clear expectations or provide timely and appropriate coaching will have poor performing departments and high turnover.  Include transfers between departments when checking turnover due to management style.

2.  Poor Company Culture.  If the culture of your company is such that employees feel they are just cogs in the machinery, they will soon tire of the job and look elsewhere.  Check your turnover rate of employees who have been with you less than two years and go over the exit interviews.  If possible conduct an employee survey to check on culture and morale.  Employee boredom is a drain on productivity and morale.  Sharing the company vision and being open to employee input will help to build a better company culture.

3.  No Empathy.  If your employees feel that you don’t care for them, then they won’t care for you.  You don’t need to become best buddies, but you should be able to acknowledge them as people.  Ask about their families and about causes and events that are important to them.  Be aware of times when they may be focused on events outside of work and find ways to manage with empathy.

4.  Not Recognizing Employee Achievement.  Employees need to feel a part of the company and to know that their efforts are appreciated.  Good effort and poor performance both need to be recognized.  A careful balance of encouragement and reality is needed so that employees see that they will be given the training and time to succeed and yet have real consequences if they cannot meet standards.  Don’t wait until the “annual performance review”.  Discuss job performance with your employees regularly, both formally and informally. 

5.  No Room or Encouragement For Growth.  On a Linked-In survey this was the number one reason for leaving a job.  Check your turnover rates by length of service. Do you see a jump at around two years and again after five years?  Listen to your employees and make sure they have options to develop their talents, even if it is just trying out a different work station on the line. Look for opportunities for employees to take on projects and new roles.

6.  Job Insecurity.  This can be a circular problem - people feel insecure and leave their jobs because they see others leaving which causes those left behind to feel insecure and so on.  If you have recently gone through a series of layoffs or if lots of people are leaving voluntarily, you will need to address this problem with transparent management.  Don't sugar coat or promise things that you can not deliver, but telling your employees about current and future events that will affect the company and their jobs will go a long way to breaking the cycle of insecurity.

7.  Poor On-boarding.   A good start ensures every new employee has a feeling that they are valued and the company is invested in them. This will reduce turnover that occurs in the first months and get your new employees up to speed faster.  Good on-boarding starts with accurate job descriptions communicated honestly during the interview.  Include an accurate description of the work environment.   Then have and follow a plan for the first few weeks to make sure the new employee is given the tools to be successful.  Everyone is happier, more productive and more likely to stay on job if they feel they are successful.

8.  Poor Hiring.  Poor hiring starts with not correctly identifying the job duties and characteristics needed for success in the position. Once these are identified the interview questions should focus on these characteristics. Do you find a lot of terminations for bad performance in particular jobs?  Detailed investigation will be needed to correct the job description and expectations before you will get a good hire.

You will have some terminations that at first glance are due to bad performance – but think carefully about these terminations and you will see many of them can also be classified in one of the above categories.

Calculate and track your turnover rates and work through the underlying causes to improve the morale and productivity of your workforce.  You will see the benefits of a low turnover rate as your company becomes the place where everyone wants to work.  Employees who feel appreciated and understood will bring the creativity and enthusiasm that will grow your business.

Carolyn Hughes, SPHR, SHRM-SCP